Recommendation 17

Ofgem told us that, in its view, the price cap had been a huge benefit for customers and had done a lot of good for them over the last six months, and that while the price cap could not stop rising energy prices, it had “mitigated them somewhat”. It explained that the price cap had prevented suppliers from immediately being able to put up their prices in response to the increases in wholesale prices, which meant price rises were staggered, helping customers to manage them.38 It also explained that, more broadly, the price cap limited suppliers’ profit margin to 2%, whereas in 2015–16 some suppliers were charging margins of up to 8%.39 However, between the price cap’s introduction in 2019 and April 2022, a typical customer’s bill nonetheless increased by 78%, from £1,105 per year to £1,971. The subsequent 80% increase in the price cap to £3,549 in October will mean it 33 Q 59; C&AG’s Report, para 1.6 and 2.6, Figure 3 34 C&AG’s Report, para 1.7 35 Qq 21, 88 36 Q 56; C&AG’s Report, para 2.14 37 Ofgem, Ofgem updates price cap level and tightens up rules on suppliers, Press release, 26 August 2022 38 Qq 21, 55 39 Q 59 14 Regulation of energy suppliers will have increased 221% between 2019 and October 2022.40 We asked the Department whether it had considered introducing a cap on the amount that customers pay on their overall bills rather than the profits that suppliers could make. The Department told us that this would create a crisis elsewhere in the energy system, and that it would require an “almost complete reinvention of the way our energy market works”.41 Ofgem told us that it had to reflect costs in the setting of the price cap, but that the Government had put in place a series of measures, such as the Energy Bill Support Scheme, as a way of mitigating those rises as best it could. We also asked the Department if anything more could be done to support businesses that are not protected by the price cap and find they cannot afford their energy bills. The Department